DOJ Brass: Swiss Banks to Turn Over Account Information Soon

We have always kept our readers apprised of the latest news with regard to the crackdown on foreign bank accounts used to hide money from the IRS and the U.S. Treasury. True to form, we thought it important to share a message delivered by top brass in the Department of Justice. Delivered last week, Acting Assistant Attorney General Caroline D. Ciraolo delivered an address to the press at a Pen and Pad event where she detailed the government’s progress on the negotiations between Swiss banks and the State Department.

Swiss Banks Indicted For Undeclared American Accounts

With the very public indictments of Swiss banks in 2012 and 2013 (followed by the indictment-induced shutdown of Wegelin), banks around the world that had previously or even currently provided services that were used to harbor American taxpayer money were shaking in their boots. This reaction was likely warranted. In addition to the threat of criminal penalties, banks were facing hefty civil levies. To make matters even worse, they were witnessing some of their key employees being indicted for their role in the activity. The DOJ smelled blood in the water and used this fear to their advantage.

In late 2013, the Department of Justice announced a new program to allow Swiss banks that were not currently being investigated by the U.S. to come forward if they had been involved in any activity that the U.S. would deem to be criminal. In exchange for coming forward and cooperating, the banks would be eligible to receive the benefits of a non-prosecution agreement. The banks would also be required to pay a penalty.

The Terms of the Non-Prosecution Agreement

Playing on the fears of the Swiss banking community worked. Over 100 banks jumped at the opportunity and applied to be a part of the program. Though, the implementation of the program was not without some pushback. Attorneys for a number of the Swiss banks that had previously signed up to be a part of the program voiced concerns over the scope of the program requirements. Under the terms, the DOJ demanded nothing short of complete cooperation. And not only did the terms require the banks to comply with U.S. investigations, but they also suggested that cooperation in investigations of other nations could also be required. The underlying question prompting the attorney’s inquisition was exactly what would the banks need to do to cooperate? And for how long?

Through Ms. Ciraolo’s address last week, the Department of Justice attempted to answer some of the questions of the banks. The general terms of the agreement will last four years. The terms include the requirement that the participating banks close accounts that are being used to hide American’s money. Further, they will be required to cooperate with the federal and state governments with regard to accounts that were or are being used to hide money from the IRS. Lastly, the banks will need to take steps, including training and additional oversight, to ensure that this type of secrecy doesn’t happen again. Notwithstanding the four-year term of the agreement, participating banks will also be required to cooperate in any criminal investigation for matters that were not time-barred before August 29th, 2013.

A Clear Warning to Taxpayers

Ms. Ciraolo’s message was clear: Swiss banks will begin signing these agreements in the very near future. When that happens, the banks will be obligated to turn over account and other personal information of Americans to the IRS and the Department of Justice. The Foreign Bank Account Reporting (FBAR) laws require that any taxpayer report a foreign bank account with a balance of over $10,000. Those who do not comply with the law will be prosecuted and can be sentenced to lengthy federal prison sentences.

The federal government is encouraging taxpayers to voluntarily come forward and disclose their previously secret accounts. In return for the disclosure and the payment of a reduced penalty and any back-taxes owed, the government will not pursue criminal charges against you (much like the agreement that the Swiss banks are entering into). But the Offshore Voluntary Disclosure Program has a catch: if the government has already received information about your secret account, you will not be eligible for the OVDP. This essentially creates a race between the taxpayer and the Swiss bank that has taken part in the non-prosecution program. Though, the Swiss bank has nothing to gain by a taxpayer participating in the OVDP and a taxpayer has everything to lose.

Contact Us Today

Consulting an experienced tax attorney as soon as possible will provide you with your best chance at walking away from an undeclared account with the least damage done. At the Tax Law Offices of David W. Klasing, our tax and accounting professionals have years of experience in the OVDP process. Further, we have assisted our clients in tax matters ranging from audit defense to criminal investigation defense. When going up against the government, it is foolish to go alone. Let us zealously advocate on your behalf.

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